United States v. MCI Communications Corporation and BT Forty- Eight Company (``Newco''); Public Comments and Response on Proposed Final Judgment

DEPARTMENT OF JUSTICE

Antitrust Division

United States v. MCI Communications Corporation and BT Forty-

Eight Company (``Newco''); Public Comments and Response on Proposed

Final Judgment

Pursuant to the antitrust Procedures and Penalties Act, 15 U.S.C.

16(b)-(h), the United States of America hereby publishes below the

comments received on the proposed Final Judgment in United States v.

MCI Communications Corporation, et al., Civil Action No. 94-1317, filed

in the United States District Court for the District of Columbia,

together with the United States' response to the comments.

Copies of the comments and response are available for inspection in

Room 3235 of the Antitrust Division, U.S. Department of Justice, Tenth

Street and Pennsylvania Avenue N.W., Washington, D.C. 20530 (202-514-

2481) and at the office of the Clerk of the United States District

Court for the District of Columbia, United States Courthouse, Third

Street and Constitution Avenue N.W., Washington, D.C. 20001.

Constance K. Robinson,

Director of Operations, Antitrust Division.

Comments Relating to Proposed Final Judgment and Response of the United

States to Comments

United States of America, Plaintiff, v. MCI Communications

Corporation and BT Forty-Eight Company (``NewCo''); Defendants.

[Civil Action No. 94-1317 (TFH)]

Pursuant to Section 2(b) of the Antitrust Procedures and

Penalties Act (15 U.S.C. 16(b)-(h)) (``APPA''), the United States of

America hereby files the public comments it has received relating to

the proposed Final Judgment in this civil antitrust proceeding, and

herein responds to the public comments. The United States has

carefully reviewed the public comments on the proposed Final

Judgment and remains convinced that entry of the proposed Final

Judgment is in the public interest.

I. Background

This action was commenced on June 15, 1994, when the United

States filed a civil antitrust complaint under Section 15 of the

Clayton Act, as amended, 15 U.S.C. 25, alleging that the proposed

acquisition of a 20% equity interest in MCI Communications

Corporation (``MCI'') by British Telecommunications plc (``BT''),

and the proposed formation of a joint venture between MCI and BT to

provide international enhanced telecommunications services, would

violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, by

lessening competition in the markets for global seamless

telecommunications services and for international telecommunications

services between the United States and the United Kingdom.

On the same date, the United States submitted a proposed Final

Judgment, a Competitive Impact Statement, and a Stipulation signed

by the defendants consenting to entry of the proposed Final

Judgment. The proposed Final Judgment contains terms and conditions

safeguarding against discriminatory and other anticompetitive

practices that would favor the defendants over competing United

States providers of international telecommunications services and

harm competition. The Competitive Impact Statement explains the

basis for the Complaint and the reasons why entry of the proposed

Final Judgment would be in the public interest. In the Stipulation,

defendants and the United States consent to entry of the proposed

Final Judgment by the Court after completion of the procedures

required by the APPA.

II

Compliance With the APPA

The APPA requires a sixty-day period for the submission of

public comments on the proposed Final Judgment, 15 U.S.C. 16(b). In

this case, the sixty-day comment period commenced on June 27, 1994,

and terminated on August 26, 1994. During this period, the United

States received comments by one competitor of MCI and BT relating to

the proposed Final Judgment.\1\ The United States responds herein to

those comments. Upon publication in the Federal Register these

comments and the following response of the United States to these

comments, pursuant to 15 U.S.C. 16(d) of the APPA, the procedures

required by the APPA prior to entry of the proposed Final Judgment

will be completed, and the Court may enter the proposed Final

Judgment. The United States will move the Court for entry of the

proposed Final Judgment after the public comments and this response

of the United States have been published in the Federal Register.

---------------------------------------------------------------------------

\1\These comments are attached as Exhibit A.

---------------------------------------------------------------------------

III

Response to Public Comments

The only comments received by the United States were filed by

ACC Global Corporation (``ACC''), one of the companies recognized by

the United States and the defendants in the Stipulation as a

competitor entitled to receive information concerning the

defendants, under the provisions of the proposed Final Judgment. ACC

is a resale provider of international telecommunications services in

the United States, and one of its subsidiaries has received a

license to provide international simple resale services in the

United Kingdom. ACC does not oppose prompt resolution of this matter

through a consent decree, and indeed it considers the transparency

requirements in Section II.A of the proposed Final Judgment as ``of

vital importance in ameliorating the potential anticompetitive

impact of the agreements that gave rise to the complaint filed by

the DOJ in this matter.'' ACC Comments at 2. These transparency

requirements, ACC states, provide ``substantial protection to

Competitors such as ACC'' because they ensure the availability of

evidence that can be used in enforcement proceedings under the

decree, or in proceedings before the Federal Communications

Commission and British regulatory authorities. Id. at 3. ACC's

concerns pertain solely to two limited aspects of the transparency

provisions, which it recommends be clarified or modified. After

consideration of ACC's comments, the United States is of the view

that neither of the modifications recommended by ACC are necessary

to achieve the competitive purposes of the proposed Final Judgment.

A. Provision of Information Directly to Competitors

First, ACC contends that the information to be disclosed by

defendants under Section II.A should be provided by defendants

simultaneously both to competitors and to the Department of Justice,

rather than being submitted first to the Department and then being

furnished by the Department to qualified competitors, as the

proposed Final Judgment now specifies. Although ACC recognizes that

it is qualified to receive the information from the Department, and

does not suggest that it would be refused access, it believes that

for the defendants to provide the information directly to the

competitors would involve only a ``slight incremental burden,''

would facilitate monitoring by competitors, and would relieve the

Department of the ``burden of handling the distribution function.''

ACC Comments at 3.

The procedure for providing information from defendants to their

competitor through the Department, as described in Section IV.E of

the proposed Final Judgment and the Stipulation, was developed in

response to the concerns of defendants that they not be required to

disclose to the public at large, or to competitors for use in the

marketing and sales of their services, information that may be

competitively sensitive. The provision of this information to

competitors, as ACC appreciates, is intended to aid in detecting

discriminatory or other anticompetitive conduct and making

appropriate complaints to government authorities.

While the United States, in the circumstances of this case,

accepted that some protection against general public disclosure of

the defendants' information should be provided, it opposed allowing

the defendants to have any role in screening their competitors and

determining which ones would have accress to the information, or

being able to influence the timing of such access. The United States

was reasonably concerned that the defendants would have incentives

to frustrate and delay access to their information by competitors,

and might impose unreasonable confidentiality restrictions that

would discourage competitors from availing themselves of access to

the information, were they assigned the responsibility of

disseminating the information to competitors directly.

ACC's proposal, if adopted, could have the unintended

consequence of impairing rather than facilitating monitoring of

defendants by their competitors, and could impose the additional

burden on the Department of refereeing disputes over access

procedures between defendants and firms such as ACC. There is no

reason for ACC to be concerned that the Department will postpone

dissemination of the information that it receives from defendants.

Rather, qualified competitors such as ACC that enter into a simple

form confidentiality agreement with the Department and abide by the

agreement will be sent promptly copies of any information furnished

by defendants pursuant to Section II.A of the Final Judgment,

following the Department's receipt of the information.

B. Waiver of Transparency Requirements by the United States

Second, ACC objects to the provision in Section II.A that would

allow the United States to waive compliance with the transparency

requirements, in whole or in part, through written notice to

defendants and the Court. ACC believes that giving the United States

discretion to waive the transparency requirements without prior

public notice and comment and approval by the Court would ``defeat

the purpose of the Tunney Act,'' ACC Comments at 4, and could lead

to the United States vitiating the decree, whether intentionally or

unwittingly due to lack of the knowledge of the industry possessed

by defendant's competitors.

The transparency requirements are the most detailed and complex

substantive provisions of the proposed Final Judgment, and therefore

the most likely to be affected by regulatory changes in the United

States and the United Kingdom as well as marketplace developments.

They have been designed to be consistent with existing regulatory

requirements in both countries, and they do not conflict in any way

with the additional obligations recently imposed by the Federal

Communications Commission as a precondition to its approval of the

transactions between BT and MCI, following the filing of the

proposed Final Judgment with the Court.\2\

---------------------------------------------------------------------------

\2\In re Request of MCI Communications Corporation [and] British

Telecommunications plc Joint Petition for declaratory Ruling

Concerning Section 310(b)(4) and (d) of the Communications Act of

1934, as amended, File No. I-S-P-93-013, FCC 94-188 (released July

25, 1994).

---------------------------------------------------------------------------

It remains possible, however, that future actions by

telecommunications regulatory authorities in the United States or

the United Kingdom could give rise to conflicts with the Final

Judgment, or that some of the transparency provisions could become

unnecessary as the result of regulatory decisions or significant

changes in the competitive environment in the United Kingdom

affecting international telecommunications. Accordingly, the

proposed Final Judgment was drafted to provide some flexibility for

limited adjustments without unduly burdening the Court. The United

States agreed to include in the proposed Final Judgment language

giving it authority, upon express written notice to defendants and

to the Court, to waive the transparency requirements in whole or in

part without a prior public comment process or formal approval by

the Court. This will enable the United States to respond rapidly to

changing conditions that affect the enforcement and usefulness of

these requirements.

The United States would not, of course, be obliged to waive any

of the transparency requirements merely because a regulatory agency

adopted similar obligations for defendants, or took action giving

rise to a conflict with the defendants' decree obligations. Nor

would a decline in BT's market shares or other changes in its

competitive position necessarily warrant modification.\3\ The United

States would, however, be able to modify the transparency

requirements where desirable to further the public interest, without

the need for lengthy comment filing periods or delays engendered

from crowded court dockets. Often it will be useful, as ACC

suggests, for the United States to obtain information from

competitors as well as defendants before agreeing to modify any of

the transparency requirements. There is nothing in the proposed

Final Judgment that precludes the United States from soliciting the

views of affected competitors on a case-by-case basis before

reaching a decision, and indeed the United States expects that it

would frequently do so.

---------------------------------------------------------------------------

\3\Information disclosed in BT's most recent public report for

1994, which the United States obtained after the filing of the

Complaint and proposed Final Judgment, indicates that BT's current

market shares are no more than one to three percentage points below

those stated in the Complaint and the Competitive Impact Statement.

This report also acknowledges that there are signs that the rate of

attrition of BT's market share for business customers is declining.

---------------------------------------------------------------------------

ACC is incorrect in suggesting that this authority for the

United States to waive the transparency requirements is somehow

improper under the Tunney Act. The APPA requires that any proposal

for a consent judgment submitted by the United States in a civil

antitrust proceeding be filed with the district court, and directs

that the consent judgment only be entered after the district court

has found that it is in the public interest. 15 U.S.C. 16(b), (e).

It nowhere precludes the district court, however, from concluding

that it would be in the public interest to permit the United States

to waive compliance with certain specified provisions of a consent

judgment after its entry, so as to respond to regulatory or

marketplace changes. ACC cites no authority to the contrary.

Were the United States and the defendants to agree to a

modification of this consent judgment after its entry, this Court

would in any event be ``bound to accept any modification that the

Department * * * reasonably regarded as advancing the public

interest.'' United States v. Western Electric Co., 993 F.2d 1572,

1576 (D.C. Cir.), cert. denied, 114 S. Ct. 487 (1993). Section VII

of the proposed Final Judgment, with which ACC does not quarrel,

specifies that ``[i]f a motion to modify this Final Judgment is not

contested by any party, it shall be granted if the proposed

modification is within the reaches of the public interest.'' The

discretionary waiver authority in Section II.A of the proposed Final

Judgment simply averts the risk of prolonged litigation over every

change to the transparency requirements, litigation that would in

the great majority if not all cases result in no public benefit, but

would simply confirm that the modification agreed to by the United

States and the defendants was within the reaches of the public

interest.

IV

Standard of Review

Pursuant to 15 U.S.C. Sec. 16(e), the proposed Final Judgment

cannot be entered unless the court determines that it is in the

public interest. The focus of this determination is whether the

relief provided by the proposed Final Judgment is adequate to remedy

the antitrust violations alleged in the Complaint. United States v.

Bechtel Corp., 1979-1 Trade Cas. (CCH) 62,430, at 76,565 (N.D. Cal.

1979), aff'd, 648 F.2d 660, 665-66 (9th Cir.), cert. denied, 454

U.S. 1083 (1981).

Absent a showing of corrupt failure of the government to

discharge its duty, the Court, in making its public interest

finding, should * * * carefully consider the explanations of the

government in the competitive impact statement and its response to

comments in order to determine whether those explanations are

reasonable under the circumstances.

United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas.

61,508, at 71,980 (W.D. Mo. 1977). The court may reject the

agreement of the parties as to how the public interest is best

served only if it has ``exceptional confidence that adverse

antitrust consequences will result * * *.'' United States v. Western

Electric Co., 993 F.2d at 1577.

V

Conclusion

After careful consideration of the comments, the United States

continues to believe that, for the reason stated herein and in the

Competitive Impact Statement, the proposed Final Judgment is

adequate to remedy the antitrust violations alleged in the

Complaint. There has been no showing that the proposed settlement

constitutes an abuse of the United States' discretion or that it is

not within the zone of settlements consistent with the public

interest. Therefore, entry of the proposed Final Judgment should be

found to be in the pubic interest.

Dated: September 8, 1994.

Respectfully submitted,

Carl Willner,

Attorney, U.S. Department of Justice, Antitrust Division.

Certificate of Service

I hereby certify that on this date I have caused to be served by

first class mail, postage prepaid, or by hand, if so indicated, a

copy of the foregoing Response to Public Comment upon the following

persons, counsel for defendants in the matter of United States of

America v. MCI Communications Corporation:

Michael H. Salsbury, Esquire, Jenner & Block, 601 13th Street, NW.,

Washington, D.C. 20005

Counsel for Defendant, MCI BY HAND

Janet L. McDavid, Esquire, Hogan & Hartson, 555 13th Street, NW.,

Washington, D.C. 20004

Counsel for Defendant, BT Forty-Eight Company BY HAND

Dated: September 8, 1994.

Carl Willner,

Attorney, Communications & Finance Section, Antitrust Division.

Exhibit A

Richard L. Rosen, Esq.,

Chief, Communication and Finance Section, Antitrust Division, Room

8104, 555 Fourth Street, NW., Washington, DC 20001

Re: United States v. MCI Comm. Corp. and BT Forty-Eight Co., Civil

Action No. 94 1317 (TFH) (D.D.C.)--Comments of ACC Global Corp.

August 26, 1994.

Dear Mr. Rosen: On behalf of ACC Global Corp. (``ACC''), we

respectfully submit these comments on the Proposed Final Judgment in

the above captioned case. ACC, a wholly-owned subsidiary of ACC

Corp., headquartered in Rochester, New York, is an international

resale interexchange carrier that is an applicant for authority to

provide international private line resale service between the United

States and the United Kingdom. Another ACC Corp. subsidiary, ACC

Long Distance UK Limited, received the first U.K. license to provide

international simple resale service. ACC is one of only seven

entities which the parties have stipulated are ``qualified United

States international telecommunications providers''

(``Competitors''), as defined in Section II.E. of the proposed Final

Judgment. As such, ACC competes with BT Forty-Eight Co. and its

parent firms, MCI Communications Corp. (``MCI'') and British

Telecommunications plc (``BT'') (collectively ``Defendants'').

ACC does not oppose prompt resolution of this matter through

entry of a consent decree. ACC strongly recommends, however, that

``the transparency'' requirements of the proposed Final Judgment be

clarified and modified so as to ensure that they achieve the

intended effect of minimizing the potential anticompetitive effects

of the Defendants' concerted activities. Specifically, ACC's

comments address two respects in which ACC believes that the

``transparency'' provisions of the proposed Final Judgment are

deficient or unclear. First, ACC believes that the proposed decree

should be clarified to ensure that the Competitors as well as the

Department of Justice (``DOJ'') receive copies of the information

required to be furnished under the transparency requirements.

Second, ACC is seriously concerned about the adverse impact of the

provision permitting the DOJ to waive the transparency requirements

of the decree without notice or comment by the beneficiaries of

those requirements and without Court approval.

I. Importance of Transparency Requirements

ACC considers the transparency requirements of the Proposed

Final Judgment (Section II.A) to be of vital importance in

ameliorating the potential anticompetitive impact of the agreements

that gave rise to the complaint by the DOJ in this matter.

As the DOJ alleges in its Complaints, the challenged agreements

between BT and MCI will provide BT with an ``increased incentive''

as well as the ``ability'' to

use its market power in the provision of local and domestic and

international long distance telecommunications services in the UK to

discriminate in favor of MCI and NewCo against other US

international telecommunications and enhanced telecommunications

providers.\1\

---------------------------------------------------------------------------

\1\Complaint, 30(a).

---------------------------------------------------------------------------

and

favor MCI over its competitors in the allocation of international

telecommunications traffic from the UK, substantially lessening

competition in the US.\2\

---------------------------------------------------------------------------

\2\Complaint, 30(c).

ACC is, of course, one of the potentially disfavored Competitors.

The proposed Final Judgment provides ACC and others subject to

this discrimination with important protection against such

discrimination in the Section II.A. transparency requirements. Under

Section II.A., NewCo and MCI would be required to ``disclose'' a

broad array of information regarding their dealings with BT. Under

Section IV.E., such ``disclosure'' would be made to the DOJ which

may, in turn, disclose such information to any U.S. corporation that

holds or has applied for a license to provide international

telecommunication services between the U.S. and the U.K. (This would

include ACC.)

As the DOJ recognizes in its Competitive Impact Statement, the

benefit of this requirement is that it:

Will enable the principal competitors of MCI and NewCo to

monitor whether either of these companies is receiving

discriminatory treatment in their favor from BT, and provide them

with evidence that could be used to make a complaint to any

governmental authorities in the United States or the United Kingdom.

This provision provides substantial protection to Competitors

such as ACC because it ensures the availability of evidence relevant

to enforcement proceedings under the consent decree. Moreover, such

evidence would be significant in complaint and licensing proceedings

before the Federal Communications Commission, which has enforcement

and oversight authority over the U.S. common carrier Defendants.

Similarly, such evidence would be relevant to oversight proceedings

in the U.K. before Oftel and other supervisory agencies.

II. Necessary Clarification and Modifications of the Transparency

Requirement

Competitors should not have to rely on the DOJ to provide them,

in timely fashion, with copies of information required to be

furnished under the transparency provisions. Rather, the information

should be provided promptly and simultaneously to both the DOJ and

Competitors. Without such information, Competitors cannot provide a

monitoring function contemplated by the Competitive Impact Statement

as a check on potential anticompetitive activity. Particularly in

light of the unusually short term of the proposed decree, any slight

incremental burden on the Defendants by providing additional copies

of the required information to the small number of identified

Competitors is more than justified by the greater protection of the

public afforded by facilitating Competitors' monitoring activities,

and by relieving the Plaintiff DOJ from the burden of handling the

distribution function. (The DOJ could, however, be required to

modify the class of Competitors entitled to receive the information

from time to time as additional potential class members request

inclusion in it, and to notify the Defendants accordingly.)

Similarly, ACC is also concerned that Section II.A. of the

Proposal Final Judgment permits, without either public notice or

comment or Court approval, the waiver of ``such disclosure * * * by

plaintiff through written notice to defendants and the Court.'' The

only explanation offered by the DOJ for this waiver provision is

that the ``transparency requirements may be affected by changes in

regulation or other circumstances.3''

---------------------------------------------------------------------------

\3\Id.

---------------------------------------------------------------------------

In ACC's view, providing the DOJ unfettered discretion to waive

this critical provision of the decree without Court approval or

public notice or comment would defeat the purpose of the Tunney Act.

As Judge Harold Greene recognized in United States v. American Tel.

& Tel. Co., 552 F. Supp. 131, 148 (D.D.C. (1982), aff'd sub nom.

Maryland v. United States, 460 U.S. 1001 (1983), Congress enacted

the Tunney Act because ``prior practice, which gave the Department

almost total control of the consent decree process,'' failed to

``fully promote the goals of the antitrust laws and foster public

confidence in their fair enforcement.'' Judge Greene went on to

observe that:

The legislative history shows that Congress was particularly

concerned that the ``excessive secrecy'' of the consent decree

process deprived the public of the opportunity to scrutinize and

comment upon proposed decrees, thereby undermining confidence in the

legal system. In addition, the legislators found that consent

decrees often failed to provide appropriate relief, either because

of miscalculations by the Justice Department or because of the

``great influence and economic power'' wielded by antitrust

violators. The history, indeed, contains references to a number of

antitrust settlements deemed ``blatantly inequitable and improper''

on these bases.

Id. (footnote omitted). Judge Greene also quoted the following

statement of Senator Tunney, the bill's chief sponsor:

Regardless of the ability and negotiating skill of the

Government's attorneys, they are neither omniscient nor infallible.

The increasing expertise of so-called public interest advocates and

for that matter the more immediate concern of a defendant's

competitors, employees, or antitrust victims may well serve to

provide additional data, analysis, or alternatives which would

improve the outcome.

Id. at 148 n. 70.

As Judge Greene and Senator Tunney recognized, ``mandating an

opportunity for public comment'' (id. at 148-49), including comment

from the defendants' competitors, can play a major role in ensuring

that a consent decree fully promotes the goals of the antitrust

laws.4 Moreover, as Judge Greene went on to observe: ``It is

clear that Congress wanted the courts to act as an independent check

upon the terms of decrees negotiated by the Department of Justice.''

Id. at 149.

---------------------------------------------------------------------------

\4\See also United States v. Airline Tariff Pub. Co., 1993-2

Trade Cas. 70,409 (D.D.C. 1993).

---------------------------------------------------------------------------

The blanket waiver authority conferred on the DOJ by the

proposed Final Judgment, however, is not limited by any standards or

guidelines and is totally at odds with this reasoning. Through its

unfettered discretion to waive a critical requirement of the decree,

absent judicial approval or the comment of the public or Defendants'

competitors, the DOJ could, either unwittingly or intentionally,

vitiate the decree. No adequate explanation has been offered why, if

modification of the decree becomes necessary because of changed

circumstances, the modification could not be submitted for public

comment and Court approval in accordance with the Tunney Act, as is

usually done.5 Such a requirement could avert the clearly

undesirable possibility of the DOJ's inadvertently, because of its

lack of the intimate knowledge of the industry possessed by

Defendants' competitors, authorizing the Defendants to engage in

anticompetitive conduct. Thus, at a minimum, the DOJ should be

required, prior to waiving any Section II.A. requiring, to provide

notice and an opportunity to comment to the Competitors to whom

information is to be provided pursuant to Section IV.E.

---------------------------------------------------------------------------

\5\E.g., United States v. American Tel. & Tel. Co., supra;

United States v. Motor Vehicle Mfrs. Ass'n., 1981-2 Trade Cas.

64,370 (C.D. Cal. 1981).

---------------------------------------------------------------------------

In sum, ACC believes that the transparency provisions are

critical to the efficacy of the proposed decree. In order to ensure

their implementation in an effective manner, however, they should be

clarified or modified to ensure automatic and timely disclosure also

to Competitors of the information required to be furnished to the

DOJ, and to ensure that they cannot be waived unilaterally by the

DOJ without judicial approval following notice to and an opportunity

for comment by the Competitors.

Very truly yours,

Helen E. Disenhaus,

Counsel for ACC Global Corp.

Of Counsel

Francis D.R. Coleman,

ACC Long Distance Corp.

[FR Doc. 94-23472 Filed 9-21-94; 8:45 am]

BILLING CODE 4410-01-M